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Club Property

Welcome to Club Property

Our mission:
To help first-time and experienced investors acquire appropriate investment properties for their circumstances and attain wealth and financial freedom through residential property investment.

This is done through the Property Club using our proven wealth-creation system, developed by a Financial Planner who is also a Real Estate Principal.

The Property Club works for you – the buyer. We are not Real Estate Agents, who only work for the seller.

This is not unique in New Zealand however what is unique is that we do not sell or receive commissions from property either, this is unique in New Zealand and perhaps in the world.

The Club has a range of benefits to give peace of mind to our members.

We don’t list properties, we find the appropriate property for you and when we have we provide you with Property Analysis reports attached, these are customised to your financial situation by providing us with your taxable income;we will introduce you to finance specialists if you don’t already use one ; we will introduce you to conveyancing solicitors, again if you don’t already use one; we will help you find tenants by introducing you to property managers and continue to look after you by providing you with up to date information and tips about real estate and its benefits.

So how do we make money?

We have a number of ways of making money, none of which are dependent on you buying any particular type or style of property.

Firstly we charge you a fee, actually 2 fee’s. One is a membership fee to the club. It’s a once off registration fee that allows us to manage everything in setting you up as a member. The other is a property purchase fee which we charge you when you instruct us to search for a property for you.

This fee is paid by you, not the seller of the property. In some cases the seller of the property may pay commissions to the selling agent in which case we will rebate you that amount. Sometimes this means you will actually receive more back from the seller than what you pay to us.

In some cases we will also receive a referral fee from the professionals who help you in your transaction but in no way does this cost you any more than if you went to your own bank manager, lawyer, accountant or real estate agent which is why we don’t mind you using your own professionals.

So Join the Club and receive property deals and advice that is second to none.



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What can you do to protect yourself from risk when investing in property?

What can you do to protect yourself from risk when investing in property?

Only buy residential, not commercial – in economic downturns, people may not need business premises but they will always need somewhere to live.
Personal insurance, particularly landlord’s insurance.
Rental managers – investing needs to be easy enough that you will keep it up for as long as necessary to achieve your goals
Slightly lower rents than the area average – to ensure consistent tenancy
Average price range – to ensure an easy sale when you are ready to use your money for something else
Flexible financial structure – to ensure a buffer to make things affordable when interest rates rise, or rents fall
Do not overextend yourself financially – if you borrow too heavily, you are vulnerable to a rise in interest rates or a fall in rents. If you commit too much of your income to servicing mortgages, so that day-to-day living becomes difficult, you will be unable to maintain your investments over a period of many years.

How do you know which properties make good investments?

How do you know which properties make good investments?

The property is in an area that has good infrastructure.
The property is in or very near an area that has shown long term popularity and growth, and there is every reason to expect this will continue.
The property is in or near a thriving business and community centre.
The property is an average or cheap price for the area.
The property is expected to generate a level of rent that will make it affordable to hold it for the long term.
The property has chattels which will generate a level of tax deductions that will make it affordable for the client in question to hold it for the long term.
The property’s value is at or below the average house price for the nation (thus ensuring a large potential market when it is time to sell the property).
The property is in an area that is popular with tenants
The property is in good condition
The property is low maintenance
If the property is an apartment, the building is a good one, with a good manager, body corporate, and no major issues have been noted in the body corporate minutes

How do you know the right time for your next property investment?

How do you know the right time for your next property investment?

When you can comfortably afford it. Also, your previous investments are not causing you to feel financially stretched or distressed.

When should a person begin investing in a real estate portfolio?

When should a person begin investing in a real estate portfolio?

Given that such investment is what the person requires in order to reach their goals, investment should start as soon as they can afford it. No company or individual has a crystal ball to predict the fluctuations of the market. However we do know that the longer the period over which the individual can buy and hold, the safer they will be from being adversely affected by such fluctuations.

How can you tell if real estate is the right investment for you?

How can you tell if real estate is the right investment for you?

The first important factor is how far away your retirement is. Property investment only begins to be a really viable option if you will hold the investment for at least five years. A smaller time period than that will expose you to all the risks associated with potential short term fluctuations in growth markets.

Thus if you have only two years to retirement and you take on property – and the debt associated with leveraging – and then the property goes down in value over the next two years, your losses will be magnified, and you will have no time available to stay in the market and wait until it has recovered. Odds are you will need to sell to relieve the pressure of the debt repayments (or continue to work into retirement in order to meet mortgage payments) and in selling you will crystallize the loss in value to your property.

If you have a five-year time frame and suffer a downturn in the property market during the first two years of investment, you still have another three years available, during which time the value of the property may recover and then increase beyond the amount at which you purchased.
Property is therefore only a suitable investment for those with the appropriate time horizons.

The next factor to consider is the amount of money you are able to comfortably put into a property investment. If a person has a high level of debt on an investment property then it will likely be costing them a certain amount of money per week to sustain that investment, even after the rental income is received and the tax deductions are made.

You need to decide how much you can reasonably spare from your disposable income each week, without affecting your lifestyle to a degree you will find intolerable in the long term. After all, you are going to be spending this sort of money every week over a period of many years. If it is too much for you to afford long-term, then you will be forced to sell your investment early, and will encounter all the same possible drawbacks of the person with the short time horizon.

You need to consider how realistic your contribution amount is, because it may not remain fixed. Interest rates and rental amounts fluctuate, so an investor may need to put in more (or less) money per week. Even if you have chosen a comfortable contributory amount, you may still at some point find yourself stretched (hopefully only for a period of months or perhaps a year) to an uncomfortable amount.

So if you have chosen an amount that is difficult for you to dedicate to your investments, market fluctuations may see this become impossible to sustain, and force a sale of the investment property.

It is worth noting that we set up a financial structure for the client that gives access to a certain amount of credit to assist in difficult times. This could not be a solution to difficulties lasting a period of years, but if the issue is one of several months duration, then we would expect our clients to have a buffer period.

So property investment is the right investment for the individual who has a comfortable amount of money they can put towards holding an investment, if that amount is sufficient to actually buy a suitable investment.

Equity is the other affordability factor to consider. The investor must have a deposit for a property purchase. Because most lenders will not allow more than 80% of an investment property’s value to be considered as security for a loan (and sometimes less), the remaining 20% of security must be drawn from somewhere else.
This will be either a sum of money or – far more commonly – an amount of equity in another property (typically their home).

So if an investment property is worth $300,000, the lender will allow a maximum of 80% ($240,000) of the property’s value to stand as security for the loan, and they will then require the other $60,000 to come either from the investor’s pocket (so that the total loan is only $240,000) or that the investor use $60,000 of the value from another property to provide the security for the loan on the new property (so that the total loan is $300,000.

Thus property investment is only suitable for a person who has either a lump sum in cash to provide a deposit or has equity available in another property.

These three factors essentially boil down to the questions: Do you have enough money available now to buy the property? Do you have enough available to hold on to the property? And will you continue to have enough to hold on long enough to actually benefit?

Further questions to ask would be:
Is gearing required to reach your goals?
Are you able to owe money for investments and still sleep comfortably at night?
Is your financial position such that you can buy the specific sort of property investment you need to reach your goals?

Failure to properly consider all these factors is where so-called property investment specialists have historically caused damage to the situations of investors.

Income

Income

Because investment properties are rented out, they produce an income. This income will pay same of the costs of owning the property. Thus it is much easier to own an investment property – and pay the gearing expenses of such a valuable asset – than it is to own many other sorts of growth investments.

A Growth Investment

Gearing should only ever be done into a growth investment. Anything else does not make sound financial sense, or offers the sort of financial risks no responsible financial planner would ever recommend to their client.

If an investor is not investing into a growth investment, then they are probably invested into an income investment. However gearing means they will be paying interest even as they are earning it. The amount of money they are earning will not be sufficient to justify the individual taking on the risks associated with gearing.

Certainly gearing into a growth asset is the only way to achieve the goals of many individuals.

The two growth assets available to clients are property or shares. However typically the level of gearing required by an individual – given their timeframe and the amount of money they can comfortably invest – means that gearing into property is the only real option to achieve the relevant goals.

Tax Advantages

Tax Advantages

Gearing requires the payment of interest to the lender. Property also has other expenses that must be borne by the investor. These expenses are tax deductible – as they were incurred during the process of generating an income.

However any investment which incurs costs to run will also produce tax deductions

The tax advantage property has over other investments in New Zealand, is depreciation. Every physical part of the improvements of a property is falling in value (depreciating) every year. The roof – originally worth $20,000 – has lasted five years so far and will last another 35 years. Thus it has already lost $2,500 of its original value. It continues to lose $500 of its value every year. Thus the owner of the roof (and the rest of the property) makes a loss of $500 every year. This loss is tax deductible.

The curtains cost $3,000. They will need to be replaced every 10 years. So they depreciate in value by $300 each year. This is how much the property investor ‘loses’ each year.

Once a property is purchased by an investor, they have a chattels valuer come and inspect the property, and do a valuation. This tells them how much they can claim as depreciations each year. Since these losses are largely on paper, the typical property investor will have significant tax advantages for their ownership of the property.

A newer property will have greater tax deductions than an older property. An apartment – with its lifts, pool, gym and common areas – will have greater tax deductions than a house.

If an investor has enough properties, they may end up paying no tax at all.

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